On January 25, 2018, the Department of Justice announced a new policy under which guidance documents can no longer be used as a basis for bringing a civil enforcement action (ACE), such as a False Claims Act case.
The new policy states:
“Guidance documents cannot create binding requirements that do not already exist by statute or regulation.
Accordingly, effective immediately for ACE cases, the Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules.
Likewise, Department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law in ACE cases.”
While the DOJ may continue to use agency guidance documents to explain or paraphrase legal mandates in statutes and regulations or to help prove that a party had the requisite knowledge of a legal requirement, the new policy directs DOJ not to treat noncompliance with non-binding guidance to establish a legal violation. It states, “That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements.” Agency guidance documents “cannot create any additional legal obligations.”
So what does this mean for the future of False Claims Act cases based, for example, on failure to comply with requirements included in a Medicare Manual?
At the very least, the new enforcement policy will serve as potent ammunition for those seeking to dismiss False Claims Act allegations based on the more obscure provisions of Medicare Manuals and other guidance documents. Arguments are likely to ensue about whether or not a Manual provision is creating an “additional” legal obligation or “explaining” a legal mandate. But in any event, it is clear that the DOJ’s public acknowledgement of the limited legal effect of guidance documents in the context of civil enforcement actions is likely to be useful to those threatened by whistleblower suits brought under the False Claims Act. And the new policy may well chill DOJ involvement in False Claims Act cases based solely on technical Medicare Manual and other guidance document violations.
But a number of open questions remain. For example, what are the implications of the new policy for “reverse” False Claims Act cases, which are based on a provider’s failure to timely refund overpayments, if the basis for the overpayment determination is noncompliance with a Manual provision or another interpretive guideline? And will the DOJ find a way to retrench on the principles set forth in the new policy once it fully understands how many Medicare and Medicaid False Claims Act cases are unsupportable without heavy reliance on Manuals and other HHS guidance documents?
If you have any questions about this issue or need further information, please do not hesitate to contact Mark Fitzgerald at Mark.Fitzgerald@PowersLaw.com or Diane Millman at Diane.Millman@PowersLaw.